Question

Ben and Jerry decide to incorporate their ice cream business. Allie would also like to be a shareholder in the business. As such, Ben and Allie agree that immediately after the incorporation of the company and the issuance of stock, Ben will sell Allie half of his shares in the company. Ben contributes inventory (FMV $60,000, Basis $30,000), and accounts receivable (FMV $40,000, Basis $40,000) to the corporation for 50% of the stock, and Jerry contributes equipment (FMV $60,000, Basis $80,000) for the other 50% of the stock. What gain or loss does Ben and Jerry recognize in the transfer.

A. Ben: $30,000 loss; Jerry: $20,000 gain

B. No Gain or Loss is Recognized since the transaction qualifies under §351

C. Ben recognizes a $30,000 gain but Jerry receives non-recognition treatment on the transfer

D. Ben: $30,000 gain; Jerry: $20,000 gain

E. None of these.

Answer 1

the answer is "E" None of these reason being that both of them have contribute 50% and the amount is being loss by Ben is 15K.